I acknowledge that evaluating a company’s management team can be a challenging task, as it is not easily measurable. However, forming an opinion on the quality of a company’s management is crucial to make informed judgments and comparisons. In my due diligence process, I consider the following questions:
10 Management Evaluation Questions
- Are the company’s founders still part of the management team?
- How long has the current management team been with the company?
- What is the total years of experience of the current management team?
- What qualifications do they possess?
- Does the management team have experience in the relevant industry or sector?
- Have they achieved success in their past projects?
- Are they solely committed to the company’s success, or do they hold multiple directorships?
- Does the management team own shares in the company? If so, when did they acquire them, how many, and at what price?
- Have they recently bought or sold their shares?
- Have the preset goals outlined in the Management’s Discussion and Analysis (MD&A) been achieved?
Most of the information regarding the quality, capacity, and experience of the management team can be found on the company’s website. You can typically find detailed information about the management team under sections like “About us,” “Company,” “Corporate,” “Management,” “Management Team,” or “Officers and Directors.”
To assess insider stock ownership, I suggest visiting the insider stock trading pages on UndervaluedEquity.com, which you can find via the “Search” function in the top right corner. To learn how to determine if the preset goals outlined in the MD&A have been achieved, I recommend reading the management assessment page.
Ultimately, you want to answer two questions: What are the company’s goals, and does the management team have the experience and will to achieve them?
Management Evaluation Tool for Canadian Listed Companies
The Canadian Securities Administrators (CSA) offer a useful tool for assessing a company’s management team: the disciplined persons list. You can access this list by clicking here.
The disciplined persons list reveals the names of all persons who have been disciplined by various securities commissions and regulatory bodies since 1987. It also includes the names of persons whose sanctions have expired.
Note: It is always good to see a substantial stock ownership by management as it aligns their interests with the interests of regular shareholders. It is essential to find out when management bought these shares and at what prices to gauge their confidence in the company’s long-term prospects. Ideally, insiders should own a significant percentage of the company’s stock. However, I do not invest in companies that are controlled by insiders as they may have too much power. Therefore, I have determined a maximum insider ownership percentage. If management has not invested in the company, it would make me think twice before investing.
Note: If certain members of the management team do not own any shares in a company in which I own shares, I will always vote against the prolongation of their function at the annual shareholders meeting.